The last 3 years have seen unprecedented change in the UK and European Dental markets.
Whilst we have seen increasing consolidation across the UK market, across Europe a similar trend is occurring.
We feel we are at the early stages of consolidation of the complete European dental industry. Investors are seeing that there are considerable efficiencies and gains to be had from scale and consolidation. However, getting this right is not easy.
In fact, we have seen in the UK and European markets some of the early investors struggle to build the large successful dental corporates they aspired to do so.
For every success story, there have been several casualties over the last few years.
A Fragmented Market
Dentistry remains heavily fragmented across Europe, yet the size of the Dental services market is substantial, and growing. This presents a prime opportunity for consolidation.
Increasing regulation, dentists reaching retirement age and a growing number of female dentists are changing the structure of how dentistry is practiced.
Strategic investors and private equity see these changes as an opportunity, offering scope to acquire, consolidate, improve efficiencies, and sell at greater multiples.
The UK Dental Market
Approximately 1,400 practices out of 11,000 dental practices across the UK belong to Dental Body Corporates. We are seeing small owner managed groups emerge, seeking to acquire further practices, and then exiting with a sale to larger dental groups.
Recent significant deals include the purchase of Southern Dental by Swiss based Private Equity firm, Jacobs Holding. Interestingly, Jacobs Holding owns a dental group in Scandinavia too.
One of the larger deals of 2016 was the purchase of Oasis Healthcare by BUPA. Again, interestingly, BUPA own Sanitas, a dental chain in Spain.
Sources suggest that MyDentist, the largest Dental Body Corporate in Europe, are currently not acquiring additional practices whilst apparently targeting operational and delivery challenges.
This presents an opportunity for a buy and build project delivered by existing and new entry investors.
In the last 12 months, the team at Samera have now begun working with a significant number of new investor groups, and we anticipate this trend to continue as investors appetite for the UK dental market grows.
The acquisitions sought by groups are highly driven by profit. Investors are always looking for individual practices or dental groups with a strong possibility of integrating easily into their existing groups.
Costs savings such as materials, labs, wages, clinical waste and other practice overheads are typically achieved in the first year post acquisition and profit improvements plans start taking place early on.
The European Dental Markets
As we have witnessed in the UK the most successful dental groups are the Groups that grew without losing touch with their locality and retained dentists and support staff post acquisition.
How to successfully build a branded dental group
Building a pan- European Group is a new and very attractive proposition and one that could work using similar principles as the successful UK Groups.
However, we feel there are a few important steps any growing dental corporate must master if they are going to succeed in building a successful branded dental group.
Centralising Head Office overheads
Through the use of a shared service centre, such groups can manage centralised costs well, but at the same time negotiate better discounts with suppliers through economies of scale. In addition, with scale comes a certain element of power, enabling larger groups to negotiate stronger lease terms in better locations, whilst offering a stronger covenant to and potential landlord.
The use of technology
Dentistry is evolving rapidly in the space of technology. Whilst many small dental practices use third party dental laboratories to provide crowns and other laboratory related work, we foresee the larger groups will acquire such laboratories so everything can be produced “in-house”, thus increasing the groups’ profit margins.
Hiring and retaining quality dentists
We feel it is imperative that such growing groups build a business that really supports their dentists and hygienists with their careers. The patient-dentist relationship is a very important relationship, and we have seen numerous cases of groups being rather heavy handed in their approach to professional team members, which has seen patients leave and goodwill destroyed very quickly. In order to build a successful branded dental group, at the heart of the business has to be its people, and keeping them happy. A failure to do so, will be the downfall for any ambitious dental group.
Building a brand
The last few years has seen Dentistry become a much more brand-oriented industry. Patients and consumers are attracted to strong brands, and we feel this will continue to grow in the Dental sector.
For further information on marketing a dental practice, check out our Learning Center here.
In the last 2 years across Europe, DentalPro in Italy acquired Dentadent and Gruppo Giovanni Bona before selling to BC Partners (Bencis Capital Partners).
Elsewhere in Europe Vitaldent in Spain was acquired by JB Capital.
Jacobs Holdings from Switzerland, is rapidly growing their presence in Northern Europe via acquisitions of Colosseum Smile and Southern Dental.
As seasoned experts of the UK and European Dental market, we feel the market possesses all the necessary ingredients for further consolidation.
The fragmented nature of the market, increasing private equity and strategic interest in the sector, and the changing fundamentals of the actual market place across Europe, highlight that the opportunity for further consolidation is considerable.
How Samera can help
Samera Practice Sales is part of Samera Business Advisors, the leading professional services group for Dentists.
Through our close contact with Dentists, Dental groups, and both buyers and sellers across the UK and Europe, we are perfectly positioned to assist.
Samera work with a number of Dental groups and growing Private Equity funded groups, so if you are seeking assistance on either the buy or sell side, we can help you.
Over the years we have grown strong connections not only in the UK and Ireland, but also in Southern Europe too.
Our main qualities are being proactive, efficient, making things happen and our multilingual and specialist team that can be your conduit to Pan- European consolidation plans.